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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Other current issues

Calder & Moss, an audit firm, uses data analytics software to test 100% of a client's sales ledger entries for unusual posting patterns, rather than selecting a sample. Under ISA 500 and ISA 330, how should the auditor regard the software's output?

Analytics output is audit evidence only when the auditor has assessed the relevance and reliability of the underlying data and followed up the exceptions. Testing the full population does not remove the need to confirm the data is complete and accurate, as ISA 500 requires.

  1. AAs audit evidence only if the auditor has assessed the relevance and reliability of the data used and considered the exceptions identifiedCorrect
  2. BAs sufficient appropriate evidence on its own because the whole population was tested, with no need to assess data reliability
  3. CAs evidence of lower quality than a sample because automated tools cannot detect misstatements
  4. DAs not audit evidence, since only manually performed procedures can support the auditor's opinion

Explanation

ISA 500 requires the auditor to consider the relevance and reliability of information used as evidence, including its source and completeness. Testing a whole population does not remove the need to verify the input data or to investigate exceptions. Option B is wrong because unreliable input data makes the output unreliable regardless of coverage.

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